The $40,000 put option has become one of the most significant positions in the Bitcoin market ahead of its Feb. 27 expiry, underscoring the strong need for downside protection after the brutal sell-off.
Options are derivatives that give the holder the right, but not the obligation, to buy or sell Bitcoin at a predetermined price before expiration. Put options act as insurance against price declines, paying out if Bitcoin falls below a set strike price.
The $40,000 put is the second-largest put in open interest, with approximately $490 million in notional value associated with that level, underscoring interest in deep tail risk hedging. BTC is down 50% from its October highs and is currently trading around $66,000, with positions reshaping across the board as traders hedge against further losses.
Data from Deribit, a Dubai-based exchange owned by Coinbase, shows that Bitcoin options with a notional value of about $7.3 billion are set to expire at the end of this month.
Meanwhile, the $75,000 strike price of $566 million also represents the maximum level of pain. Maximum pain is the price at which the greatest number of options expire worthless, thus minimizing the buyer’s payout. With spot prices below $75,000, higher prices after expiration could reduce losses for call option sellers.
Although there are generally more calls than puts, with 63,547 call contracts compared to 45,914 puts, the position is not purely bullish. The put-to-call ratio of 0.72 indicates that upside bets remain dominant, but the large number of put open interest concentrated at lower strikes highlights a clear need for downside insurance.
Traders are retaining the risk of a rebound but are also hedging against the risk of another sharp decline.